A STUDY ON CAPITAL BUDGETING AT SRT TATA MOTORS,COIMBATORE

CHAPTER-1
1.1 INTRODUCTION

CAPITAL BUDGEING
An efficient allocation of capital is the most important finance function in modern times.
It involves decisions to commit firm’s funds to long-term assets. Such decisions are tend to
determine the value of company/firm by influencing its growth, profitability & risk.

Investment decisions are generally known as capital budgeting or capital expenditure

decisions. It is clever decisions to invest current in long term assets expecting long-term benefits
firm’s investment decisions would generally include expansion, acquisition, modernization and
replacement of long-term assets.

Such decisions can be investment decisions, financing decisions or operating decisions.

Investment decisions deal with investment of organization’s resources in Long tern (fixed)
Assets and / or Short term (Current) Assets. Decisions pertaining to investment in Short term
Assets fall under “Working Capital Management”. Decisions pertaining to investment in Long
term Assets are classified as “Capital Budgeting” decisions.

Capital budgeting decisions are related to allocation of investible funds to different long-term
assets. They have long-term implications and affect the future growth and profitability of the
firm.
In evaluating such investment proposals, it is important to carefully consider the expected
benefits of investment against the expenses associated with it.Organizations are frequently faced
with Capital Budgeting decisions. Any decision that requires the use of resources is a capital
budgeting decisions. Capital budgeting is more or less a continuous process in any growing
concern.

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For Example: Purchase of Land is an example of Capital Budgeting decision. Similarly
replacement of outdated equipment with modern machines, purchase of a brand or business,
computerization and networking the organization, investment in research and development of a
product launch of a major promotional campaign etc are all example of Capital Budgeting
decisions.

However, in all cases, the decisions have a long-term impact on the performance of the
organization. Even a single wrong decision may in danger the existence of the firm as a
profitable entity.

IMPORTANCE OF CAPITAL BUDGETING

There are several factors that make capital budgeting decisions among the critical decisions to be
taken by the management. The importance of capital budgeting can be understood from the
following aspects of capital budgeting decisions.

1. Long Term Implications: Capital Budgeting decisions have long term effects on the risk
and return composition of the firm. These decisions affect the future position of the firm
to a considerable extent. The finance manger is also committing to the future needs for
funds of that project.
2. Substantial Commitments: The capital budgeting decisions generally involve large
commitment of funds. As a result, substantial portion of capital funds is blocked.
3. Irreversible Decisions: Most of the capital budgeting decisions are irreversible
decisions. Once taken the firm may not be in a position to revert back unless it is ready to
absorb heavy losses which may result due to abandoning a project midway.

4. After the Capacity and Strength to Compete: Capital budgeting decisions affect the
capacity and strength of a firm to face competition. A firm may loose competitiveness if
the decision to modernize is delayed.

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PROBLEMS & DIFFICULTIES IN CAPITAL BUDGETING

1. Future uncertainty: Capital Budgeting decisions involve long-term commitments. There

is lot of uncertainty in the long term. The uncertainty may be with reference to cost of the
project, future expected returns, future competition, legal provisions, political situation
etc.
1. Time Element: The implications of a Capital Budgeting decision are scattered over a long
period. The cost and benefits of a decision may occur at different point of time. The cost of a
project is incurred immediately. However, the investment is recovered over a number of
years. The future benefits have to be adjusted to make them comparable with the cost.
Longer the time period involved, greater would be the uncertainty.
Example: The new product proposed to be launched by a firm may result in increase or decrease
in sales of other products already being sold by the same firm. It is very difficult to ascertain the
extent of impact as the sales of other products may also be influenced by factors other than the
launch of the new product.

ASSUMPTIONS IN CAPITAL BUDGETING

The Capital Budgeting decision process is a multi-faceted and analytical process. A number of
assumptions are required to be made.

1. Certainty with respect to cost & Benefits: It is very difficult to estimate the cost and
benefits of a proposal beyond 2-3 years in future.
2. Profit Motive : Another assumption is that the capital budgeting decisions are taken with
a primary motive of increasing the profit of the firm.

The activities can be listed as follows

 Dis-investments i.e., sale of division or business.
 Change in methods of sales distribution.
 Undertakings an advertisement campaign.
 Research & Development programs.

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  Launching new projects.
 Diversification.
 Cost reduction.

FEATURES OF INVESTMENT DECISIONS

 The exchange of current funds for future benefits.

 The funds are invested in long-term assets.
 The future benefits will occur to the firm over a series of years.

IMPORTANT OF INVESTMENT DECISIONS

 They influence the firm’s growth in long run.

 They effect the risk of the firm.
 They involve commitment of large amount of funds.
 They are irreversible, or reversible at substantial loss.
 They are among the most difficult decisions to make.

TYPE OF INVESTMENT DECISIONS

 Expansion of existing business.
 Expansion of new business.
 Replacement & Modernization.

INVESTMENT EVALUATION CRITERIA

 Estimation of cash flows.

 Estimation of the required rate of return.
 Application of a decision rule for making the choice.

Consideration of cash flows is to determine true profitability of the project and it is an

unambiguous way of identifying good projects from the pool. Ranking is possible it should

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 recognize the fact that bigger cash flows are preferable to smaller ones & early cash flows are
referable to later ones I should help to choose among mutually exclusive projects that which
maximizes the shareholders wealth. It should be a criterion which is applicable to any
considerable investment project independent of other.There are number of techniques that are
in use in practice. The chart of techniques can be outlined as follows:

CAPITAL BUDGETING PROCESS:

Atleast five phases of capital expenditure planning & control can be identified:

 Identification Organization of investment opportunities.

 Development of forecasts of benefits and costs.
 Evaluation of the net benefits.
 Authorization for progressing and spending capital expenditure.
 Control of capital projects.

1.2 REVIEW OF LITERATURE

DAYANAND ET AL. (2002): In his research on “A study of capital budgeting in ultra tech
cement limited” capital budgeting technique is used for selecting an investment projects which
maximizes shareholder’s wealth.
BRICKLEY (2006): Capital budgeting is a long term assets which deals with the investment
that gives high return. And these aspects are prepared a year advance and these can be extended
to five, ten or fifteen years in futures.

PETERSONand FABOZZI(2002): He defines that capital budgeting is the method of

evaluating and choosing investment opportunities in long term assets where it uses the data for
more than one to five years.

SEKWAT (1999):capital budgeting technique is used for planning, controlling and allocating
limited resources for competing demands of customer. Capital budgeting plays a vital role in

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planning and making decision towards an investment projects. Hence capital budgeting
techniques are able to choose best investment projects among other alternatives.

BOWMANand HURRY (1993): capital budgeting decisions are made by the top management
as of choosing a best alternatives from the available investment projects.

1.3 NEED FOR THE STUDY

The need for the study is as follows:

 SRT Tata motors is big manufacturing unit with tata products based products are
being produced.
 The requirement of capital for each department is very high in an organization like.
 Therefore, I have under taken my study in this organization to understand the
requirements of capital and its effective allocation of resources in capital budgeting.

1.4 SCOPE OF THE STUDY

 The study has been conducted to understand the position of the industry and various
functional areas of the company and their operations. The study mainly focuses
on capital budgeting of company.
 Keep in view the accessibility and availability of the data sources 10% has been chosen
for the purpose of study. In this study to know the company’s financial position,
and which amount is capable to investing every year. To study of the profitability of the
company after expansion of the projects This study causes 2012-17.

1.5OBJECTIVES OF THE STUDY

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 Primary Objective:
Primary objective is the study of Capital Budgeting at SRT TATA Motors in Coimbatore.
Secondary Objective:
 To find out the relationship between the cash inflow and cash outflow.
 To find out the relationship between the Initial investment and Annual cash flow.
 To find out the relationship between the Average net income and Average investment.
 To find out the relationship between the Present value of cash inflow and Cash outflow..

METHODOLOGY OF STUDY
The information for the study is obtained from two sources namely.
 Primary Sources
 Secondary Sources

Primary Data :
It is the information collected directly without any references .it is mainly through interactions
with concerned officers & staff ,either individually or collectively; some of the
information has been verified or supplemented with personal observation. These sources
include.
1. Through interaction with the various department managers of SRT TATA
2. Guidelines give by the project guide ch. Venkateswarlu.
Secondary Data :
This Data id from the number of books and records of the company the annual report published
by the company and other magazines. The secondary data is obtained from the following.
 Collection of required data from annual record ,monthly records internal
 Other books and journals and magazines, Annual report of the company.

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 Tools Used

 Net Present Value

 Pay Back Period
 Average Rater of Return
 Profitability Index
 Profit After Tax

1.6 LIMITATIONS OF THE STUDY

 As the information is highly confidential, the information provided by the
management is limited. Hence some of the conclusions are based on assumptions that
are taken under the guidance team of SRT Tata.
 For evaluation of the project I have followed the guidelines given by the Project
Appraisal Division of the Planning, which are mentioned here after.
 This study is confined only to Finance and Planning departments of SRT Tata.
 Time taken for this study is 6 weeks, which is found to be less, as Capital Budgeting is
a vast topic.
 Tool and Techniques of Capital Budgeting are implemented only under the Construction
stage of SRT Tata.

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 CHAPTER-II
INDUSTRY & COMPANY PROFILE
2.1 INDUSTRY PROFILE
The Indian automobile market is one of the largest in the world, both in terms of sales
volume and production. Talking about historical roots of the car market in India, the first time
that a vehicle came on road was in 1897. Till 1930, India did not have any manufacturing facility
and cars were imported directly from other countries. The landmark decade in the manufacturing
process was that of 1940s, in which Indian companies like Hindustan Motors and Premier started
to manufacture cars of other firms. During the same decade, Mahindra & Mahindra also started
to produce utility vehicles.
A brief history of the Indian automobile industry
Soon after independence 1947, Government of India tried to create an automotive
component manufacturing industry in order to supplement the automobile fraternity. From 1960
to 1980s, the Indian market was dominated by Hindustan Motors, which gathered a large amount
of share due to its Ambassador model. However, during 1950s till 1960s, the overall industry
moved at a slow pace due to trade restrictions set on imports. Soon after this repressive phase,
demand surged but to a smaller extent, which was mainly seen in the tractor and commercial
vehicles segment.

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 It was in 1980s that the two firms, Hindustan Motors and Premier, were challenged by a
new entrant, Maruti Udyog Limited. Soon after liberalisation period, car makers that were
previously not allowed to invest in Indian market due to stringent policies arrived in the country.
Post liberalisation, the alliance between Maruti and Suzuki was the first joint venture between an
Indian company and foreign one. Slowly and steadily, the economic reforms brought in the led to
the entry of major foreign companies like Hyundai and Honda, which expanded their bases to the
country. From 2000 to 2010, almost every major car company expanded its presence to India by
establishing manufacturing facilities across different parts of the country.

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 As the manufacturing process during early 2000 decade gained traction, exports of cars
was quite slow in that period. Maruti Suzuki was among the first car brands that started shipping
vehicles to major European markets. During the same decade, the Government of India
introduced mandatory emission norms in order to reduce pollution arising out from vehicles. The
updated guidelines were known as 'Bharat Stage' came into effect in major cities as these
standards were based on stringent European norms. At present, Bharat Stage IV is implemented
in 13 cities that include Delhi (NCR), Mumbai, Kolkata, Chennai, Bangalore, Hyderabad,
Ahmedabad, Pune, Surat, Kanpur, Lucknow, Solapur, and Agra while the rest of the nation is
still under Bharat Stage III.

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Over the years, the car market in India has evolved by leaps and bounds as almost all major
companies are present in the country. India has now become a hub for auto makers to set up their
plants for manufacturing vehicles intended for domestic and international markets. The three
prominent regions in which the majority of Indian car industry is concentrated lies in south, west
and north. In the southern region, Chennai is the hub for manufacturing vehicles while Mumbai
and Pune belt comes in second place. For the north, the NCR holds a fair share as far as
concentration of production facilities is concerned.
To list a few commendable feats of the Indian car industry, it emerged as the fourth
largest exporter of passenger cars behind Japan, South Korea, and Thailand in 2009. While in
2010, India emulated its previous year's performance to become the third largest exporter of cars
in Asia. The biggest reward came for the Indian car market in 2011 as it became the sixth largest
country in the world in terms of production.
Automobile and Economic Growth
The evolution of the auto industry contributed much to the economic growth of the country. It
also helped the finance and insurance sectors. In time, vehicle insurance was set up and governed
by the Motor Vehicles Act, 1988. It ushered in mandatory insurance for vehicles driven on
Indian roads.
India Story
 The 2 wheeler contribute to 79.17% of the total automotive production of the country
 Steady growth in demand due to ever rising income, middle class, and a young
population
 The Government of India takes Initiatives to set up manufacturing plants through Make
in India
 India has a large pool of skilled labour and a growing technology base
 It has the world’s 12th largest HNI population with a growth rate of 20.8%, thus
increasing demand for luxury cars
 By the year 2020, India’s share in the global passenger vehicle market is expected to
touch 8% from the present 2.4% recorded in 2015

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2.2 COMPANY PROFILE
SRT Tata in Peelamedu, Coimbatore is a top company in the category Car Dealers-Tata
cars .Part of the USD100 billion Tata group founded by Jamsetji Tata in 1868, Tata Motors is
among the world’s leading manufacturers of automobiles. We believe in ‘Connecting
aspirations’, by offering innovative mobility solutions that are in line with customers' aspirations.
We are India's largest automobile manufacturer, and we continue to take the lead in shaping the
Indian commercial vehicle landscape, with the introduction of leading-edge powertrains and
electric solutions packaged for power performances and user comfort at the lowest life-cycle
costs. Our new passenger cars and utility vehicles are based on Impact Design and offer a
superior blend of performance, driveability and connectivity.
TATA focus on connecting aspirations and our pipeline of tech-enabled products keeps
us at the forefront of the market. We have identified six key mobility drivers that will lead us
into the future – modular architecture, complexity reduction in manufacturing, connected &
autonomous vehicles, clean drivelines, shared mobility, and low total cost of ownership. Our
sub-brand TAMO is an incubating centre of innovation that will spark new mobility solutions
through new technologies, business models and partnerships.
mission - across our globally dispersed organisation – is to be passionate in anticipating and
providing the best vehicles and experiences that excite our global customers.
Strength
With a strong and trained workforce they are in a position to receive various awards and
accolades in the Automobile service industry. They 200 plus work force constitutes to our
consistent success and customer delight.
TATA Group Profile
Founded by Jamsetji Tata in 1868, the Tata group is a global enterprise headquartered in India,
comprising over 100 independent operating companies. The group operates in more than 100
countries across six continents, with a mission 'To improve the quality of life of the communities
we serve globally, through long-term stakeholder value creation based on Leadership with Trust'.

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 Tata Sons is the principal investment holding company and promoter of Tata companies.
Sixty-six percent of the equity share capital of Tata Sons is held by philanthropic trusts, which
support education, health, livelihood generation and art and culture. The revenue of Tata
companies, taken together, is ~$100 billion. These companies collectively employ over 695,000
people.
Each Tata company or enterprise operates independently under the guidance and
supervision of its own board of directors and shareholders. There are 29 publicly-listed Tata
enterprises with a combined market capitalisation (India) of about $144.79 billion (as on March
28, 2018). Tata companies with significant scale include Tata Steel, Tata Motors, Tata
Consultancy Services, Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices,
Titan, Tata Communications and Indian Hotels.

Many Tata companies have achieved global leadership in their businesses. For instance,
Tata Communications is the No1 international wholesale voice provider and Tata Motors is
among the top ten commercial vehicle manufacturers in the world. Tata Steel is among the top
10 best steelmakers and TCS is the second-largest IT services company in the world by market
cap and profit. Tata Global Beverages is the second-largest tea company in the world and Tata
Chemicals is the world’s third-largest manufacturer of soda ash. Employing a diverse workforce
in their operations, Tata companies have made significant local investments in different
geographies.
With its pioneering and entrepreneurial spirit, the Tata group has spawned several
industries of national importance in India: steel, hydro-power, hospitality and airlines. The same
spirit, coupled with innovativeness, has been displayed by entities such as TCS, India’s first
software company, and Tata Motors, which made India’s first indigenously developed car, the
Tata Indica and the smart city car, the Tata Nano. Pursuit of excellence has similarly been
manifested in innovations like the SilentTrack technology developed by Tata Steel Europe and
the next-generation Terrain Response, including infrared laser scanning to predict terrain and
Wade Aid to predict water depth, by Jaguar Land Rover.

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 The Tata Trusts, majority shareholders of Tata Sons, have endowed institutions of
science and technology, medical research, social studies and the performing arts. The trusts also
provide aid and assistance to non-government organisations working in the areas of education,
healthcare and livelihoods. Tata companies themselves undertake a wide range of social welfare
activities, especially at the locations of their operations, as also deploy sustainable business
practices.
Going forward, Tata companies are building multinational businesses that seek to differentiate
themselves through customer-centricity, innovation, entrepreneurship, trustworthiness and
values-driven business operations, while balancing the interests of diverse stakeholders including
shareholders, employees and civil society.
SRT PROUCTS
TATA NANO
Announced as the most affordable production car in the world, Tata aimed for a price of
one lakh rupees, or 100,000, Tata Motors announced in 2006 that the Nano would be
manufactured in Singur, West Bengal. Local farmers soon began protesting the forced
acquisition of their land the new factory entailed. Tata first delayed the Nano launch and later
decided to build the car in a different state, Gujarat, instead.
TATA BOLT
Tata Bolt is a new hatchback created by Tata Motors under its Falcon programme. The
car was revealed at Indian Auto Expo 2014 along with its sedan version, the Tata Zest. The car is
expected to be launched in Indian markets in the latter half of 2014 after the launch of its sedan
version. The diesel version of Tata Bolt will be fitted with 1.3-litre quadrajet diesel engine which
is already being used on Indica Vista and Manza where as the petrol version of Tata Bolt will be
powered by a new 1.2-litre turbocharged, 89 bhp engine. The new car is based on existing
platforms on which Vista and Manza are built. Tata Bolt will be built at Tata Motor's Pimpri-
Chinchwad plant alongside the Tata Vista and the Tata Indica.

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TATA VISTA
The Tata Indica Vista can be considered as the new, improved version of this really
popular car. Tata Indica has sold a lot of units in the country, and the country's premium car
manufacturer realized that it was high time that they improved the car, so that the net is cast
wider. The Tata Indica Vista managed to cater to a wider range of consumers and it come fitted
with lot of different features as well.
TATA INDICA
The Tata Indica is a supermini car produced by the Indian manufacturer Tata Motors
since 1998. It is the first passenger car from Tata Motors and it is also considered India's first
indigenously developed passenger car. As of August 2008, more than 910,000 units were
produced and the platform had spawned off close to 1.2 million vehicles. The annual sales of
Indica has been as high as 144,690 units in 2006–07. As of July 2009, monthly sales of Indica
were around 8000 units. The models have also been exported to Europe, Africa and other
countries since late in 2004.
TATA MANZA
Tata Manza is next generation sedan from the Indian car company Tata Motors
Limited. The Tata Manza is also known as The Club Class Sedan.[2] There are eight variants
available currently, four each in petrol and diesel.
Manza was first launched on 14 October 2009. It was made available in 4 variants namely Aqua,
Aura, Aura ABS and Elan, Aqua being the entry level variant and Elan being the top most
variant. In October 2012, Manza was re-launched as Manza Club Class.

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 CHAPTER-3
DATA ANALYSIS AND INTERPRETATION
3.1 NET PRESENT VALUE
Net Present value is used in capital budgeting to analyze the profitability of a project or
investment. It is calculated by difference between present value of cash flow and present value of
cash outflows over a period time.
NPV = Present Value of Cash inflow – Present value of the cash outflow

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 TABLE 3.1
NET PRESENT VALUE

Year Cash Inflows Dis. @12% Present Value of Cashflows

2012-13 Rs. 1.129.384.000 0,892 Rs. 1,007,410.528

2013-14 Rs. 1.310.895.000 0,797 Rs. 1,043,986.315

2014-15 Rs. 1.761.879.000 0,711 Rs. 1,252,695.969

2015-16 Rs. 1.732.086.000 0,635 Rs. 1,109.874.610

2016-17 Rs. 2.193.061.000 0,567 Rs. 1,243,465.587

Present Value of Cash Flows Rs. 5,647,433.010

Less: Cash Outlay Rs. 5,489.200.000

Net Present Rs. 158,233.010

Value

Interpretation:
The Net Present Value is the difference between the “ Present value of cash inflows” and
“Present value of cash outflows. Total net present value of SRT is 158233.010.

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 CHART 3.1
NET PRESENT VALUE

1400000

1200000

1000000

800000
present value of cashflows
600000

400000

200000

0
2012-13 2013-14 2014-15 2015-16 2016-17

3.2 PAY BACK PERIOD

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 Pay back period in capital budgeting refers to the period of time required to the funds
expended in an investment or to reach the breakeven point.

Initial Investment
Pay Back Period= ------------------------
Annual cash inflow

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 TABLE 3. 2
PAY BACK PERIOD

Year Investments (In Cash inflows(P.V.) Cash Out Flows

Lakhs) (Initial)
2012-13 25,000.00 2900 33000

2013-14 12,000.00 1100 70000

2014-15 90,000.00 1600 40000

2015-16 30,000.00 1200 80000

2016-17 50,000.00 1800 60000

TOTAL 473,000.00 31900 525000

Initial Investments
Pay Back Period = ---------------------------
Annual Cash inflows

40,000
= --------- 5 Years
8000

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 CHART 3.2
PAY BACK PERIOD

90,000.00

80,000.00

70,000.00

60,000.00

50,000.00
INVESTMENT
40,000.00

30,000.00

20,000.00

10,000.00

0.00
2012-13 2013-14 2014-15 2015-16 2016-17

Interpretation:

a) In the Pay Back method the Investment and the case inflows are fluctuating from
year to year increase(2013-17)
b) Cash inflows are in the order of increasing to decreasing .It has high value in
2014-15

3.3 AVERAGE RATE OF RETURN

It is also known as return on investment (ROI). It is an accounting method, which uses
the accounting information revealed by the financial statements to measure the profitability of an
investment proposal. According to Solomon, ARR on an investment can be calculated as “ the
ratio of accounting net income to the initial investment i.e.” .

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 Average Net Income
ARR = ---------------------------
Average Investment

TABLE 3.3
AVERAGE RATE OF RETURN

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 Year Investments (Lakhs) Average Income Cash Flows after
(Thousands) Taxes

2012-13 260,000.00 64000 200000

2013-14 600,000.00 78000 300000

2014-15 100,000.00 25000 600000

2015-16 250,000.00 18000 800000

2016-17 520,000.00 22000 750000

Total 3,280,000.00 430000 4360000

Average Income
Average Rate of Return = ----------------------
Average Investments

20000
= --------- = 0.06%
400000

CHART 3.3
AVERAGE RATE OF RETURN

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 600,000.00

500,000.00

400,000.00

300,000.00 AVERAGE RATE OF RETURN

200,000.00

100,000.00

0.00
2012-13 2013-14 2014-15 2015-16 2016-17

Interpretation:
a) Average rate of return is calculated based on Average income and Average investment
where as Average income in the year fluctuating from 2014-15 to 2016-17 .

3.4 PROFITABILITY INDEX

Yet another time-adjusted method of evaluating the investment proposals is the benefit-
cost (B/C) ratio of profitability index PI). It is benefit cost ratio. It is ratio of present value of
future net cash inflows at the required rate of return, to the initial cash outflow of the investment.

Present Value of Cash inflows

PI = -----------------------------------------

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 Present Value of Cash outflows

TABLE 3.1
PROFITABILITY INDEX

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 Year Cash Cash Out Flows P.I
inflows(P.V.) (Initial)
2012-13 19210 33000 0.58

2013-14 11130 70000 0.159

2014-15 65420 40000 1.63

2015-16 19233 80000 0.24

2016-17 61323 60000 1.02

Total 498896 525000 0.95

P.V. of Cash Inflows

PI = ---------------------------
Initial Cash outlays

498896
= ---------- = 0.95
525000

CHART 3.4
PROFITABILITY INDEX

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 1.80

1.60

1.40

1.20

1.00
PROFITABILITY INDEX
0.80

0.60

0.40

0.20

0.00
2012-13 2013-14 2014-15 2015-16 2016-17

Interpretation:
a) The profitability index of present value of cash inflows and cash out flows is
fluctuation from year to year in the year 2012-13 the present value of cash inflows
is 18180 were as in the year 2016-17 has been increased with 61323.
b) The highest cash inflows has been recorded in 2014-2015 as 161290 and lowest
has been recorded as 18180 in the year 2016-2017.

3.5 PROFIT AFTER TAX

Profit after tax is the total amount the a business earns after all tax deductions have take
place It is used as a barometer to determine how much a business really earns and for day to day
activities

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29
 TABLE 3.5

PROFIT AFTER TAX

YEAR PROFIT AFTER TAX

2012-13 34245

2013-14 37338

2014-15 35396

2015-16 36085

2016-17 52609

CHART 3.5

PROFIT AFTER TAX

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 60000

50000

40000

30000 PROFIT AFTER TAX

20000

10000

0
2012-13 2013-14 2014-15 2015-16 2016-17

Interpretations:

a) The chart show the increase value after the deduction of tax in the year 2016-17.

b) The Profit is changing from year to year in the year 2012-13it is 34245 where as
increasing value in the year 2013-2014 and decreased, in the year 2015-16 the value is
increased.

CHAPTER-4

31
 FINDINGS,SUGGESTION,CONCLUSION
4.1 FINDINGS
 Net present value of SRT is 158233.010

 In the Pay Back method the Investment and the case inflows are fluctuating from year to
year increase(2013-17) .Cash inflows are in the order of increasing to decreasing .It has
high value in 2014-15
 Average income in the year fluctuating from 2014-15 to 2016-17

 The profitability index of present value of cash inflows and cash out flows is fluctuation
from year to year in the year 2012-13 the present value of cash inflows is 18180 were as
in the year 2016-17 has been increased with 61323.The highest cash inflows has been
recorded in 2014-2015 as 161290 and lowest has been recorded as 18180 in the year
2016-2017.

 The Profit is changing from year to year in the year 2012-13it is 34245 where as
increasing value in the year 2013-2014 and decreased, in the year 2015-16 the value is
increased.

4.2 SUGGESTIONS:
 The capital recovery period is very good. The same system may be adopted.

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  When taking 10.37% internal rate of return the net present value show negative value.
This based on to take the internal rate of return..
 The estimated cash flows of the project include interest and taxes are considered due to
accept or reject of investment proposes.
 In SRT Tata Ltd, basing on the capital budgeting techniques like NPV, and P.I.
their results the time value of money is assumed and predicted in a proper way. This
can be said basing on the positive results occurred. Hence time value of money is
satisfactory, so it can be continued these techniques.
 It is advised to minimize cost of capital of the company.

4.3 CONCLUSION

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 Based on the study in SRT Tata motors,Ltd. there is forecasting project cash
flow involves numerous estimate and many individuals and departments participate in
this exercise. The role of the finance manager is to coordinate the efforts of various
departments and obtain information from them, ensure that the forecasts are based on
a set of consistent economic assumptions, keep to the exercise focused on relevant
variables and minimize the bias is inherent in cash flow forecasting.

In the study, I know that the company is following pay back period. Based on
the data shows that the company can use any criteria to get return on the investment.

The project “A study on Capital Budgeting at SRT Tata motors Ltd” it is

suggested to hold the company in the same situation.

BIBLOGRAPHY

Website :

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www.srttata.com
www.yahoofinance,com

1. DAYANAND ET AL. (2002)Research Journal of Finance and Accounting www.iiste.org

ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.1, 2016.

2. BRICKLEY (2006) Research Journal of Finance and Accounting www.iiste.org ISSN

2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.1, 2016.

3. PETERSON and FABOZZI(2002) Research Journal of Finance and Accounting

www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.1, 2016.

4. SEKWAT (1999) Research Journal of Finance and Accounting www.iiste.org ISSN

2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.1, 2016.

5. BOWMAN and HURRY (1993) Research Journal of Finance and Accounting

www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.7, No.1, 2016.

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